Debunking Forbes' Hit Piece on Bitcoin

in bitcoin •  11 months ago

Forbes Trollface.png

If you follow bitcoin, there's a good chance you've come across this hit piece:

https://www.forbes.com/sites/jasonbloomberg/2017/12/09/seven-lies-bitcoin-fans-tell-themselves-and-anyone-else-who-will-listen/#4768a351402d

I've taken it upon myself to respond to the article point by point. Please enjoy, and share with all your naysayer friends who are smugly posting this confirmation-bias propaganda.

#1 Weird argument. Of course nothing is exactly like anything else. The point of comparisons is to compare relevant similarities, not to illustrate identicality. He says that the difference far outweigh the similarities, but does not list a single similarity or difference. Not a convincing argument. Not an argument at all, in fact; just a statement of his personal faith.

On to his horrible example: Bitcoin was used for illicit transactions because it was thought to be anonymous. Dollars are used for illicit transactions because they are definitely anonymous. After you hand over that briefcase, there's no trace from the dollar to you. These days, mobsters avoid BTC because a supercomputer can trace the chain of transactions on the blockchain to them no matter how many accounts they meander through before trying to cash out into fiat. Instead, they are using DASH, Monero, ZCash, and other more anonymous coins. Oh, and dollars, of course. Still mostly dollars.

#2 Very bad research or very poor comprehension or intentional misdirection. Bitcoin has never been hacked. Exchanges that trade in bitcoin have been hacked, and that is precisely because they handle their transactions "off chain." If a website that uses bitcoin was hacked, or somebody's e-mail is hacked and their credentials are used to steal their coins, that's not bitcoin's fault. Nor is it the fault of the dollar when banks get hacked and lose billions of dollars. The blockchain itself, which is the essence of bitcoin, has never been hacked. As far as I know, every computer science Ph.D agrees that it CANNOT ever be hacked.

He makes a fair point that bitcoin is very new, and the institutions that deal with it haven't even existed long enough to have developed reputations of trustworthiness. However, that is not bitcoin's insecurity. It is the institutions'. Bitcoin is much safer than the dollar, if given the same institutional infrastructure. Right now it's playing against the dollar's 300 year head-start, and gaining rapidly.

#3 Wow. Wow. Really? "$20 will always be $20. Such is the nature of money."

Okay, now if I take 20 bitcoins and I put them in a wallet and I take them out next year, they will still be 20 bitcoins. Durrrrr. "That is the nature of money," as he said. Meanwhile, inflation and market rates will have changed its value, exactly in the same way that they have changed the dollar's value. I guess he never heard of "real" vs "nominal?" What kind of hack hit piece is this?

Assets with low market capitalization inevitably exhibit far greater volatility than assets with very high market capitalization. The dollar may be the most highly capitalized asset in the world, literally thousands of times more capitalized than bitcoin. There is nothing inherent about the dollar or bitcoin that makes one more stable than the other. They are both backed by nothing other than their own demand. If bitcoin were to supplant the dollar as the world's favorite currency for international transactions, then the dollar would be subject to higher volatility and bitcoin would be more stable. That's pretty basic for somebody published at Forbes not to understand. This must be a propaganda piece.

#4 I've never heard anyone say that bitcoin has any intrinsic value outside of its use as a public ledger. Most people who are believers talk about how it removes the need for "trusted" institutions at all when dealing with money. That is of extreme value, because those institutions take a cut of every single transaction that we trust them to keep track of for us. How much are all the credit card companies and commercial banks worth combined (revenue, not profit)? That's the value that bitcoin is offering to return to us, minus the cost of mining.

#5 Bitcoin is probably in a bubble right now, in my opinion, but it's weird, because the value of any fiat currency is based on the demand for that fiat currency. Bitcoin is fiat currency, but without a nation. National fiat enforces a national market for the currency, so that keeps prices pretty stable as long as the size of the national economy stays pretty stable and foreign demand for the national currency is pretty stable. Bitcoin, in contrast, has no borders and no guaranteed markets.

The weird thing is that as more people value bitcoin, more people also demand bitcoin, causing more people to demand it, causing more people to value it. There is a positive feedback loop in operation that has potential to crowd out virtually all other forms of money. On the other hand, if confidence is shaken, then it has the potential to move the opposite way with the same positive feedback, potentially reducing it to $0.0000000000000000 in value, in a spectacular hurry. In contrast to stocks, bitcoin is only in a bubble if it stops before realizing its potential. If it does keep growing toward global dominance, then its incredible growth will be more akin to that of Google, which also went from a small group of nerds to global adoption, and stock price history reflects that transformation. How many times was Google called a bubble? Look at the fundamentals driving demand to explain price moves before deciding whether or not something is a bubble.

#6 He is absolutely right and I hope everyone holding bitcoin made it through the rest of his propaganda to see this statement. However, it should be noted that he's talking about investments generally, not bitcoin specifically.

#7 I think I have thoroughly demonstrated that he is full of crap. Not because he's a bitcoin naysayer (I am too, long run), but because he's intentionally misleading people and/or seriously misinformed. He has no business even publishing his own writing, let alone pulling a salary from a name like Forbes.

Well, I hope you enjoyed this debunking! I certainly did. I can hardly wait to see all these guys starting over from scratch when their dollar holdings become worthless.

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